Local TV confronts its own financial crisis

The financial meltdown of the newspaper business has been astonishing. From an all-time high of $49 billion in 2005, U.S. newspapers lost nearly half their revenue in just four years — to $28 billion in 2009, a drop of 43 percent.

But this item isn’t about newspapers. It’s about local TV, which is facing its own financial crisis.

During that same time — 2005 to 2009 — local TV revenue fell nearly 24 percent, from about $21 billion to about $16 billion, according to the Pew Project for Excellence in Journalism. And the slide is picking up speed.

Newspapers have been hammered by the loss of lucrative classified advertising to free sites like Craigslist, as well as continuing consolidation by large retailers, which leaves fewer retail advertising customers. For local TV stations, the biggest hit has come in the auto business, and with brutal swiftness. In just one year — 2008 to 2009 — local station revenue from automakers and auto dealers plunged 43 percent, according to the Television Bureau of Advertising, an industry trade group. That’s huge, because auto advertising historically has accounted for nearly a third of local station revenue.

Other categories of local TV spending were hit nearly as hard in 2009: prescription, medication and pharmaceutical advertising was down 35 percent from the previous year, home centers and hardware stores down 26 percent and furniture stores down 24 percent.

Like newspapers, local TV stations for decades enjoyed virtual monopoly status in their medium. Cable began making serious inroads on local broadcast TV in the 1980s, offering more channels and more entertainment choices. But local stations maintained their exclusive grip on news programming — which historically has provided 40 to 50 percent of station revenue. That’s why there are so many local news programs. They’re relatively cheap to produce and advertisers like them.

But adding another half-hour local news program — at 5:30 a.m., at 5 a.m., even at 4:30 a.m. — isn’t going to be enough to stop the bleeding. As one longtime local TV producer told me over drinks recently, “you’re just trying to put together a bunch of ones now” — meaning, advertisers looking for local reach have to buy across multiple, low-rated programs drawing 1 percent of the viewing audience.

Nail in coffin
Yet the biggest threat to local TV still looms. As media analyst Alan Mutter notes on his “Reflections of a Newsosaur” blog, the advent of IPTV, or Internet Protocol Television, may be a giant nail in local TV’s coffin.

“Once 50 to 100 megabits per second of Internet power is barreling into the high-def centerpiece of the family room,” Mutter writes, “consumers equipped with elaborate, iPad-like remote controls will be able to mix and remix anything — news, shopping, entertainment, games, music, messaging and much more — while leaning comfortably back in their easy chairs.”

Under this model, much of the programming will be free — except consumers will pay monthly or one-time fees to the cable or Internet provider that delivers it. Meanwhile, the creators and providers of programming will be able to sell ads within the content. Both scenarios cut local TV stations out of the revenue picture.

As local TV revenue drops, stations will have fewer resources to devote to local news. And with two-thirds of Americans saying they get most of their local news from TV, that will mean an ever more poorly informed public.

The news delivery model that anyone over the age of 30 grew up with — newspapers and local TV news — is broken. Whether it can be fixed is anyone’s guess — and that’s all the more reason to support the site where you’re reading this now.

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Comments (13)

  1. Submitted by Ross Williams on 05/24/2010 - 08:32 am.

    Aren’t you confusing two different phenomena? Television advertising has dropped off because of the recession, not because local stations are technologically obsolete. Newspapers are simply outdated both in content and method of delivery.

    It many be that local TV is moving in that direction. We can hope so, its really silly to waste limited public bandwidth on TV. But it seems more likely that once auto sales pick up, so will auto advertising. There no reason to think local stations won’t get their share.

    I would be extremely suspicious of projections about where the technology is headed from anyone. Especially when they include the technology du jour in description. Even people in the technology industry are constantly surprised.

    How about an article on the challenges technology poses for the advertising industry in general? Its not clear to me any of the legacy content producers are going to be able to survive, given the lack of value they provide to advertisers in terms of audience attention when they put that content online. Its a challenge not only for newspapers and other advertising media, but for the advertisers. Its not that online advertising is going to replace traditional advertising media, its that the value of advertising itself is slowly diminishing.

  2. Submitted by John Reinan on 05/24/2010 - 09:40 am.

    Very good comments, Ross. I think your final point — the diminishing value of all legacy content providers — underlines why local TV, along with newspapers and magazines (and network TV, for that matter) is in trouble.

    Yes, in the short term, local TV will recover some ad dollars from a healthier auto industry. But that doesn’t change the larger issue: that we’re transitioning to a system where content providers deliver programming directly to consumers and reap the revenue associated with it.

    I also agree that the value of a traditional advertisement is decreasing. I think the future is more in the direction of branded content, a subject I’ve written about for MinnPost in the past. Companies will provide an entire entertainment experience and reap the benefits of consumer engagement that way, rather than trying to engage consumers through a print ad or a 30-second TV spot.

  3. Submitted by Patrick Steele on 05/24/2010 - 10:52 am.

    The most damning truth concerning this shift is the insultingly inane content that local television has to offer. While gems do exist (the thoughtful discussion on TPT’s weekly Almanac, to name one) in the market, your standard 5/6/10pm newscast on any of the local (in production, not ownership or decision-making) stations is profoundly insulting to most free-thinkers with knowledge of the options that exist. Why should I listen to trivialized versions of major national or global events which are punctuated by two minute commercial segments when I have easy access to the vastly superior coverage (a term I use loosely regarding the local outlets) offered by Al-Jazeera, the BBC, the CBC, or others? As a Generation Y-er, it admittedly might just be a demographic issue…but I (knock on wood) anticipate I will live to consume content longer than the silver-hairs that the old media types pander to. The viewers still might exist, even if numbers have dropped, but perhaps advertisers know that the prime demographics (Grandma is not going to be swayed by Apple’s latest and greatest device) are topped in velocity of their exit only by the acceleration thereof.

  4. Submitted by Paul Udstrand on 05/24/2010 - 11:19 am.

    I think the news stations will have to make some choices about how they do the news. From where I sit they blow a lot money on sports, live feeds, anchors, and weather.

    This business of having people stand around in the dark “live” five or ten hours, sometime even five or ten year years after something has happened is just plain daft. That’s a lot of satellite equipment to purchase and maintain.

    This business of having a gazillion weather radars and computer models all telling us the same thing is crazy as well. It chews up time and money.

    Likewise, sending people out every day to tape or cover whatever athletes are doing or saying is pretty much a waste of everyone’s time and money. For one thing, I’m sorry but coaches and athletes just don’t have anything to say beyond sports cliches. They win or they lose a game, and it’s game, it’s not rocket science. Anyone who cares enough to watch a game can tell you why someone won or lost. And you don’t need to send a camera guy out to tape (sic) a coach talking about someone’s injury, the teams issue press releases.

    They don’t need two anchors, and I think those anchors are probably overpaid. Sorry, nothing personal.

    The resources are probably there to provide solid news, but they can’t do it the way they’re doing it. Reporters can do stories without live feeds. You don’t need your own weather satellites, the NOAA satellite I look at online shows me all I need to know. And as far as I can tell sports reporters almost never have to leave the station.

    They also they have to fire a bunch of consultants. All the stations look the same with the exception of KSTP and it’s all crime all the time format. They need to get some creative news directors will do something other than advertise the news personalities. Yeah, I know, Frank and Amelia are married, and they have kids. Problem is that doesn’t really make them any more interesting than anyone else I know. These news anchors just aren’t that interesting so building a broadcast around their personalities or lives is a bust, especially when everyone else is doing the same thing.

  5. Submitted by Fritz Dahmus on 05/24/2010 - 11:24 am.

    JOHN REINAN, you wrote…”As local TV revenue drops, stations will have fewer resources to devote to local news. And with two-thirds of Americans saying they get most of their local news from TV, that will mean an ever more poorly informed public.”

    There is the crux of the old media’s problem….they think we are too stupid to go anywhere else for our news and information. I can’t believe you made that statement. U.S. society is more informed now than ever in its history…and it is because of the death of newspapers and local TV news! People watch local TV news and read newspapers because of the tradition….but everybody sees what it reports on versus what we all have read about elswhere.

    Also, the trend you are writing about has been moving in the direction away from newspapers and local/national TV news since the late 1990’s…..not 2005. You act as though MinnPost is groundbreaking!

  6. Submitted by Chris Vogtman on 05/24/2010 - 11:38 am.

    We get it, Paul, you have no interest in sports. Some of us value that news as a break from the dreary gloom and doom that news stations like to scare us in to watching. It’s entertainment news. Why do you think they put sports/weather at the end of the broadcasts? Because most people tune in to see those two segments and they are the biggest money makers for the news stations. They also draw in more viewers for the earlier segments. That said, those two segments far and away pay for the talent who reports said sports and weather. And, beyond that, they carry enough advertising revenue to pay for reporters on higher content valued stories (read: non-entertainment) that investigative reporters provide.

  7. Submitted by Tim McNeill on 05/24/2010 - 12:03 pm.

    The real problems here are these: Too many local stations all doing news at the same time. Too many stations all covering the same events. Too many stations trying to make us like their talent. Too many stations trying for a specific demographic. Why do we need four stations in this market sending out four seperate crews to cover a press conference that gets the same amount of air time on each channel? These local stations were once cash cows. Not anymore.

    Fragmentaion is killing local news. Weaker staions and their news operations should fold. We really only need two local staions in the local news business. When Fox came into play in this market, I knew that things were going to get worse for local statioins to divide up less viewers and ad revenue. When KMSP only aired a 9PM prime time newscast they were different. But, then to go head to head with WCCO, KSTP, and KARE made this market weaker and less profitable in terms of the local news franchise. And, watering down the content with Frank and Amelia doing lame stories about family life, kids, and did you see ‘CCO’s latest report advertised where Ameilia goes undercover as a lunch lady are a poor use of precious newcast time and resouces.

    Give me thirty minutes of good local news coverage, less hype, less weather when nothing is happening, and stop fluffing up content with personality driven stories. Local news has lost its appeal and they have only themselves to blame. What happened to the real I-Team? Why does KSTP insist on chasing ambulances and cops? Why does local news have to dumb down the content? Because, they all are trying too hard to divide up fewer viewers, ad dollars, good content and innovation. Stop trying to re-invent the wheel and get back to doing what local news used to do well. Cover the news, beat the competion by digging deeper, and focus on local stories that happen in our backyards. As far as Frank and his wife being promoted as a team behind the scenes as well as on camera, give me a break!

  8. Submitted by jim hughes on 05/24/2010 - 12:28 pm.

    “Give me thirty minutes of good local news coverage, less hype, less weather when nothing is happening, and stop fluffing up content with personality driven stories.”

    Yes.

  9. Submitted by Paul Udstrand on 05/24/2010 - 12:57 pm.

    Chris,

    I get it, you like sports, but the point of the story is that news rooms are are headed into a financial crises. Obviously sports isn’t paying the bill, and the function of news is not to entertain, it’s to inform and educate. There’s already only what? 7-8 minutes of actual news in a half hour broadcast at 10:00? You have a gazillion outlets for your sports news, and you have three half hour shows after the news on Sundays, and that’s not counting the times sports stories like the Bret Favre fiasco dominate local news as actual lead stories. We have 30 minutes at 10:00 for actual local news.

    This actually point to another thread about the stadium debate and narrowing of cultural interests caused by sports. The only antidote to dreary news is sports?

    If they reduced whether to a minute thirty seconds on days when there’s no storms, and limited sports to five minutes, you’d have 20 minutes for news. News doesn’t have to be dreary, there are a lot of things to report on. You want entertainment, there’s a ton of entertainment. Like Tim pointed out, once you stop tying up resources trying to tie everything into your anchors lives or personalities, or a local connection, the possibilities are limitless.

    And if you want to do sports, don’t make it boring. There’s nothing more stupid or boring than athletes and coaches muttering sports cliches about playing, winning, or losing games. There’s an amazing variety of sports, and fun and interesting stuff going on all over the world, and a lot of it is being captured on video. I mean the whole point of sports is to entertain and have fun, they actually make it boring by pretending that it’s serious and consequential. I’ve gotten to the point where I can’t even look at some news guys anymore because they take themselves and the stories so seriously. I mean the only really interesting thing about sports is the games themselves, beyond that it’s just plain boring. You want to fill a newscast with sports, that’s your business, but make it interesting and fun, not boring as toast.

  10. Submitted by Paul Udstrand on 05/24/2010 - 02:16 pm.

    Heh, if only the could reduce whether.

  11. Submitted by Mark Bundgaard on 05/24/2010 - 04:35 pm.

    You nailed it John. The trend continues for local TV news – viewers are getting older and not being replaced by younger viewers. It is a vicious cycle, less audience means less revenue, which means less resources to cover the news, all of which makes it less relevant. I agree with Paul’s comments. Soft news (if you can call it news!) is easy to produce, hard news is just that – it takes time and effort and talented journalists.

  12. Submitted by Paul Udstrand on 05/25/2010 - 07:33 am.

    //U.S. society is more informed now than ever in its history…

    Actually I think Americans may well be more misinformed than ever before in history. Although we’ve seen a huge increase in news sources, we’ve seen a decrease in accuracy and reliability across the board.

  13. Submitted by Paul Gustafson on 05/25/2010 - 09:41 am.

    Fritz thinks we’d be fine without Old Media to get informed. Huh?

    Pray tell, where do the New Media get their stories. They have not nearly the reporting resources as TV and newspapers.

    So, who does the reporting for New Media when the Old Media is wrecked? Bloggers? Want to rely on them for insightful, objective news? Dream on.

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